Commercial Real Estate Loans and Lehman Brothers

Lehman Brothers got screwed.  They filed for bankruptcy today because foolish regulators forced Lehman Brothers to mark the commercial real estate loans in their portfolio to market.  Because the market for subprime commercial loans has completely frozen up, Lehman Brothers became insolvent.

It's a darned shame.  For the last seven years my commercial mortgage company, Blackburne & Brown Mortgage Company, Inc., has been competing against Lehman Brothers for small, subprime commercial loans.  Since their rates were better than ours, Lehman Brothers was able to cream the market for the best quality subprime commercial loans.  I never knew them to make a foolish loan.

When the dust all settles and Lehman's assets are scattered to the four winds, history will show that this was a darned fine portfolio.  They were earning around 9.5% on a portfolio of commercial first mortgage loans with an average loan-to-value ratio of 68% to borrowers with fairly decent credit.  An investor could buy that entire portfolio at par and beat the pants off of most competing investments.  These were not high-LTV loans to flakey borrowers on grossly over-valued homes.  These are darned good assets.

If anyone wants to sell a portfolio of Lehman's subprime commercial loans, Blackburne & Brown is definitely a buyer.  Please contact me, George Blackburne, immediately.

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